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News and Press Releases |
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HEADLINE:
Lawyers Find Riches In Companies' Dirty Laundry More Than $100 Million Paid For Probes
By: Kevin McCoy and Elliot Blair Smith
USA TODAY. June 18, 2003
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EXCERPT: In the past two years, boards of directors at Enron, WorldCom, Tyco and a host of lesser-known scandal-plagued companies have paid well over $100 million to a handful of lawyers for reports on what went wrong. But some critics say the costs to investors and creditors -- WorldCom has spent about $ 40 million on two probes into its fraudulent accounting -- is a scandal itself. Some investigations have become mired in controversy because of fraud they missed, millions they cost and relationships between investigators and investigated. Some creditors, prosecutors and defense attorneys say companies are overreacting. "It's just such an expense, and they're not going to come up with anything," says Jim Lowe, a Jackson, Miss., real estate agent and former WorldCom investor. "They should put the money back in the coffer and try to get the company back on its feet." But companies and the lawyers they hire to investigate say they need to know the full scope of scandals before they can truly mend their ways. In fact, a new law requires corporate audit committees to have any allegations of misconduct investigated. Latest to be made public: Coca-Cola said Tuesday that an investigation commissioned by its audit committee found improper "financial arrangements" with some of its equipment suppliers. But the audit committee said the investigators -- from Gibson Dunn & Crutcher -- debunked several larger allegations of financial fraud and racial discrimination. "When accounting problems surface, a board of directors will normally want an internal investigation so it can correct the numbers and fire the wrongdoers," says attorney and accounting fraud expert Michael Young of law firm Willkie Farr & Gallagher. Boards also "want to make plain to the world at large the truth of their own innocence." The money is usually well spent, says Trey Davis, spokesman for the University of California, which is lead plaintiff in an investors' class-action suit against Enron. "You have to consider the amount of money spent in context of magnitude of fraud or mismanagement," he says. Adding to the controversy over reports: Internal investigations rarely unearth all of a company's problems.
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